Regulus Partners, the strategic consultancy focused on international gambling and related industries, gives an insight into some of the key developments in the gambling industry as part of its ‘Winning Post’ column.

It is likely that this year’s ICE will be chiefly remembered for the Gambling Commission’s attacks on the use of promotional girls at the expo – and follow-up reports from journalists attending the event. While it is a little difficult to take seriously concerns over sexism from the Sun, the criticism was broad and the Commission surely has a point. Indeed, a number of executives attending the event expressed sympathy with the Commission’s stance, especially those with material UK businesses. Addressing sexism, and sexual exploitation, is now regularly headline news and it is unsurprising that gambling is taking its share of the scrutiny. However, what does this really say about the sector, and what needs to change?

It is likely that this year’s ICE will be the last hurrah for the Bernard Manning school of marketing (at this event). If so, then the Commission will have achieved something positive and ought to be commended. However, while there is broad recognition of the need to change, it has to be said that there was also a strong sense of grievance over perceived misattribution of blame. ICE is a global trade fair – attracting international buyers and sellers of gaming equipment. Whether British licence holders were responsible for girls in bikinis or bodypaint parading around the venue is unclear, and so the extent to which ICE is a mirror for UK (or materially UK-facing) gambling is limited at best. Therefore, recognising the ways in which ICE has to change is very different from how GB-licensees ought to behave (to an extent the role of the Commission). Unfortunately, by conflating the two issues a large amount of positive work being done to address sexism, and a growing number of senior women in the industry, is in danger of being ignored or marginalised.

Gambling is going through a period of increased scrutiny globally, while parts of it are also still firmly rooted in the culture of the 1970s. As well as improving diversity at senior and board level (‘shop floor’ staff diversity has never been a problem), gambling would be wise to consider how it presents itself also. In times like these, the industry, like Calpurnia, must be above reproach. However, given the ubiquity of promo girls at large expos across a range of industries (at least until now), and the fact that Britain’s highest paid CEO is a woman leading a gambling operator (as is the CEO of the Commission), it seems perverse and almost willful to single gambling out for opprobrium as a means of encouraging change.

There is a positive reason to embrace diversity: it is (literally) the only way to attract the best talent into the workforce and also (probably) the only way to ensure that gambling is seen as acceptable by mainstream consumers, especially Millennials. Companies that embrace diversity will be the ones that win at innovation and win at customer engagement. This is a positive story – and one that belongs at an international trade expo that often disguises a woeful lack of innovation with a fairly poor and highly sexist attempt at theatre. If industry leaders from all stakeholder groups make the story positive, they are likely to affect positive change. Conversely, castigating an entire industry segment for a much broader issue (both within the industry and without) is likely to encourage only window dressing – and consumers, companies and employees will be the poorer for that.

The attacks on gambling in general appear to be part of a growing fashion to blame the industry at large for the failings of specific companies – and on occasions to present data on a highly selective basis. It is a blunt tactic that has produced some positive results. However, the absence of discrimination and balance in judging Britain’s gambling companies may have unintended negative consequences. Britain’s gambling industry is moving forward (albeit with faltering steps) in relation to the licensing objectives. It would be a shame if this was impaired by unnecessary squabbles between industry and the Establishment.

UK: In Parliament – Lottery in spotlight as gambling gets rolled over (again)

This was just another week in Parliament for the gambling industry: a week of bulging postbags at DCMS as the deadline arrived for submissions to the Government review of machines, advertising and social responsibility; a week of meetings in Westminster committee rooms; a week of Parliamentary Questions in which even the Prime Minister was put on the spot; and a week of rumour and protestation.The Sunday Times set the pace with an article suggesting that the racing sympathies of the new Secretary of State, Matt Hancock (Cons, West Suffolk) would not unseat the cause of FOBT reform. Hancock, readers were told favoured substantial stake reduction – perhaps all the way to £2.

The Government’s Kafkaesque approach to gambling policy has encouraged plenty of speculation in the past but the fact that this story carried the Tim Shipman (political editor) by-line indicates that it ought to be taken seriously. The markets did just that, marking down shares in both Ladbrokes Coral and William Hill. There was much wailing about the deleterious effects on horse racing but also considerable scepticism given the tortured debates of recent years over the Levy and media rights (where it was argued that the turf was getting too much).

It is a troubling sign when an industry builds its defence on indirect benefits and even more concerning when those benefits turn out to be costs. The fact is that the three corners of the FOBT defence – jobs, taxes and payments to horseracing – are all business costs; items that management spends great effort on seeking to control and reduce. To pretend that they are benefits (and that they should be protected by Government even as companies attempt to diminish them) is disingenuous as well as economically weak.

On the Tuesday, the spotlight shifted to the question of restricted and closed betting accounts. In a committee room in the Lords, the bookies’ MP Philip Davies (Cons, Shipley) refereed a debate involving Richard Flint of Sky Betting & Gaming, Simon Rowlands of the Horseracing Bettors Forum and Bruce Millington of the Racing Post (with Brian Chappell from Justice for Punters and the ever-entertaining bookie Geoff Banks providing good support). It was a more grown-up affair than the partisan spats that we have become accustomed and closed with the flourish of an olive branch (grasped at either end by Flint and Rowlands).

Wednesday was National Lottery day with the chief executives of both Camelot and the Gambling Commission summoned before a Commons select committee to respond to Parliamentary laments over diminishing returns to charity from the National Lottery (and the perception that these had coincided with rising profits at Camelot).

Elsewhere that day, John Hayes (Cons, South Holland and The Deepings) challenged his party leader during Prime Ministers Questions to meet with him to discuss “the devastation, debt and despair caused by Fixed Odds Betting Terminals” and the need to “crack down on online gambling sites that target young children”. It is difficult to read too much into Mrs May’s response that “we are clear that fixed odds betting terminals stakes will be cut to make sure that we have a safe and sustainable industry where vulnerable people and children will be protected”; although betting operators may naturally hang onto the reference to sustainability.

Parliament considered questions on a range of gambling subjects, including Chris Ruane (Lab, Vale of Clywd) on “the effect on the vibrancy, and resilience of high streets” of betting shops (along with payday lenders and pawn brokers); David Drew (Lab, Stroud) on TV company lobbying on betting adverts; and Meg Hillier (Lab, Hackney and Shoreditch) on DCMS plans to address the Gambling Commission finding that “2 million people in Great Britain are addicted to gambling”.

This last question is a reflection on the current position of gambling in Great Britain. The Member for Hackney and Shoreditch would appear to have conflated gambling addiction (something that is very difficult to diagnose) with problem gambling and at-risk gambling. It is the type of sensationalism that many who ought to know better have been engaging in during recent months; and it is unlikely to lead to constructive outcomes. However, as was noted by industry executives this week at a gambling law conference, operators currently lack the confidence to push back on such misreporting.

Next week the focus shifts to betting integrity as changes to schedule 6 of the Gambling Act are considered in Parliament – but it seems unlikely that will be all.

UK: Gambling may need another review like it needs a hole in the head…but it needs this one

The publication this week of the Gambling Commission’s consultation document on the Licensing Conditions and Codes of Practice provided another demonstration that the regulator means business on the licensing objectives.

Not that long ago, the Commission inhabited a fairly narrow regulatory sphere within gambling and appeared hesitant to step outside the scope of traditional compliance (largely shaped by the old Gaming Board). Questions of advertising and marketing were devolved to other regulators (Advertising Standards Authority and the Competition and Markets Authority) while the scope of what might be considered gambling-related crime was also limited.

The Commission’s planned changes to the LCCP seem to indicate an appetite for direct action in the interests of keeping gambling fair and transparent – without necessarily being required to wait on partner agencies.

The general rule of Gambling Commission consultations is that they unleash the forces of conservatism (no matter how unsatisfactory the situation, the status quo often seems more palatable to industry than the uncertainty of change). In this instance, operators may do well to reflect that empowering the regulator to control more of the gambling ecosystem is likely to lead to more coherent policy and the more effective resolution of public concerns.

Gambling in Great Britain is currently subject to more reviews and investigations than one can wag a admonitory finger at. We don’t need yet another review – but perhaps we need this one. Given the extent of issues facing gambling right now, the need for a strong and empowered regulator with proper regulatory oversight for the licensing objectives has rarely been greater.

UK: Horseracing – racing fans not so long in the tooth…

Analysis undertaken for the Racecourse Association using advance ticket sales data, shows that ‘millennials’ (those born between 1980 and 2000) make up 44% of attendees at race meetings, bringing the average age of racing’s audience to 45 (surprisingly, one year lower than the average age across all sports). The report also suggests that women make up 40% of attendees.

While these figures are likely to be materially skewed by the online purchasing habits of the younger generation and the pre-booking mix of music festivals after race meetings, it is nonetheless positive news for a sport with an historical reputation for popularity among older (often white) men. Racing has made great progress with making the sport attractive to a wider (and often greater) audience, including themed racedays and music concerts, which is clearly paying off – although sometimes to the detriment of its more ‘traditional’ fan base. Balancing the drivers attendance and the drivers of good betting content is likely to become an even more acute need if there is a severe DCMS Review outcome for FOBTs, but a focus on productivity rather than dependency should encourage further positive product reform.

Greece: Tax issues – beware of Greeks bearing bills…

GVC has announced that it has been hit with a €189m tax bill relating to a period prior to acquisition in 2013 (ie, Sportingbet-Centric). Despite the figure being way in excess of Greek revenues during this period, GVC has entered into an agreement to pay €7.8m pcm for 24 months (ie, the full amount, which is c. 75% run-rate annual EBITDA ex-Turkey), while contesting the decision. The situation illustrates three key points that are worthy of wider stakeholder consideration. First, markets with unsettled regulatory positions, especially if they have a colourful fiscal approach, can be far more dangerous places to monetize than a simple view on direct .com gambling regulation risk can suggest. Second, the more large, public and M&A-focussed (where open-ended litigation is a real problem) companies become, the more vulnerable they are to ‘enforced compliance’. Finally – and perhaps most dangerously – the result of the contest, if negative for GVC, may point to the dangers of the offshore business-model: with minimal lobbying power and few friends (interestingly, GVC’s Greek partner Centric sold out in October), there is a danger that some jurisdictions see ‘to be regulated’ businesses as increasingly easy targets.

Europe: Media consumption – Sky’s shift to streaming

Sky TV announced this week that it is soon to launch a complete internet streaming service, which could replace its core satellite offer (although this remains a customer option). Initially launching in Austria and Italy, it will then roll out across Sky’s other European markets. The news was accompanied by H1 results, which showed that the average monthly Sky subscription had fallen by £1 (-2%) to £46 after having been static for three years, and churn rates had increased from 10.2% to 11.6% YoY. This shift to streaming services is further evidence of the channel shift which is affecting media distribution and the need for traditional channels to adapt to changing consumer habits. Typically, streaming services operate at lower price points than bundled services and therefore Sky is likely to refocus its investment strategy in the future. Indeed, the company added that it would reduce its spending on second-tier sports, focusing on providing content which will have wide market appeal across all territories (which could create or at least illustrate wider streaming opportunities for betting-led sports content businesses). Sky needs to invest in new services to remain competitive with the growing strength and relevance of streaming ‘challengers’, but lower bundled subscription pricing will likely reduce the licensing revenue available for all but the top tier sporting events. Equally, the evolving way in which sport is consumed is likely to continue to have a material impact on betting habits across markets.